Costs Award — Ontario Employment Law
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About Costs Award
In Ontario employment litigation, winning a lawsuit is only part of the financial equation. The other critical component is the 'costs award.' Governed by the Courts of Justice Act and the Rules of Civil Procedure, a costs award is an order made by a judge directing the unsuccessful party to pay a portion of the successful party's legal fees and disbursements. It is important to distinguish costs from damages; while damages compensate an employee for lost wages or human rights breaches, costs are specifically designed to partially reimburse the winner for the expense of bringing or defending the lawsuit.
Ontario operates on a 'loser pays' principle, meaning that if you sue your employer for wrongful dismissal and lose, you generally risk having to pay a portion of their legal bills, known as 'adverse costs.' However, a costs award rarely covers a lawyer's entire bill. Courts typically award fees on a 'partial indemnity' scale, which usually covers roughly 40% to 60% of the actual legal expenses. In certain situations—such as when a party engages in unreasonable litigation tactics or rejects a formal Rule 49 Offer to Settle that was ultimately lower than the trial judgment—the court may award 'substantial indemnity' costs, which covers a much higher percentage as a deterrent or reward.
Courts also heavily weigh the principle of proportionality, particularly in cases under the Simplified Procedure (Rule 76). Judges will scrutinize whether the legal fees spent on a wrongful dismissal claim are reasonable compared to the actual severance awarded (for instance, evaluating the Bardal factors for a short-service employee should not generate a six-figure legal bill). In exceptional circumstances, case law has shown that if an unsuccessful plaintiff faces extreme financial hardship (impecuniosity), a judge might significantly reduce or waive the costs awarded to the successful employer to preserve public access to justice.
Navigating the financial risks and settlement strategies of an employment dispute requires careful assessment, as courts examine the highly specific, unique conduct of both parties before finalizing any cost amounts. Because of these distinct financial liabilities, retaining appropriate professional legal guidance early in the dispute is crucial.
Frequently Asked Questions
What exactly is a costs award in an employment lawsuit?
A costs award is an order made by a court at the end of a legal proceeding requiring the losing party to reimburse the winning party for a portion of their legal fees and disbursements. It is separate from the severance or damages awarded for the actual employment dispute.
If I win my wrongful dismissal case, will the court force my employer to pay 100% of my legal fees?
No, this is a common misconception. Ontario courts generally award costs on a 'partial indemnity' scale, which realistically only reimburses about 40% to 60% of your total legal bill, meaning you will still have out-of-pocket expenses even if you win.
What is the deadline or timeline to request a costs award in Ontario?
A request for costs is usually addressed immediately after the trial judgment is rendered. The judge normally dictates a strict timeline, typically 15 to 30 days following the decision, for both parties to exchange and submit written outlines of their legal costs (costs submissions).
How does making an 'Offer to Settle' affect the costs I might get?
Under Rule 49 of Ontario's Rules of Civil Procedure, if you make a formal, written settlement offer that the employer rejects, and you later win an amount at trial that is equal to or better than your offer, the judge will typically award you much higher 'substantial indemnity' costs from the date of that offer.
If I have zero savings and lose my lawsuit against a massive corporation, do I still have to pay their costs?
Usually, yes, as the 'loser pays' rule applies to everyone. However, in rare Ontario cases, judges have denied costs to a successful employer if the losing employee proved extreme financial destitution (impecuniosity) and ordering costs would severely penalize access to justice.
At what stage in my termination dispute should I talk to a lawyer about the risk of adverse costs?
You should seek strategic legal counsel before rejecting any initial severance offer and definitely before filing a formal Statement of Claim, so you can thoroughly map out your potential financial exposure if the litigation does not turn out in your favour.
Can my employer's bad behaviour during the lawsuit increase my costs award?
Yes. If an employer plays games, intentionally delays the process, hides documents, or acts aggressively during litigation, the judge can penalize this conduct by awarding you a higher scale of costs to punish their misuse of the court system.
Common Scenarios
- An employee formally offers to settle their wrongful dismissal claim for $40,000; the employer refuses, but the judge later awards $55,000 at trial, triggering an elevated substantial indemnity costs award against the employer.
- A mid-level supervisor wins a $15,000 severance claim using Ontario's Simplified Procedure, but the judge refuses to award their requested $30,000 in legal costs because the fees are entirely disproportionate to the damages recovered.
- A single parent living paycheck to paycheck is unsuccessful in their human rights and termination claims; recognizing the worker's absolute lack of assets, the judge exercises discretion to deny the victorious company's request for out-of-pocket costs.
- An employer deliberately obscures key payroll data and forces unnecessary procedural motions to string out a lawsuit, leading the judge to award the successful plaintiff a much higher costs amount as a direct penalty for the employer's litigation misconduct.
What You Should Know
- Make strategic, reasonable Rule 49 Offers to Settle early in your lawsuit to protect yourself and maximize potential costs recovery if the matter proceeds to trial.
- Ensure your litigation strategy is strictly proportionate to the monetary value of your severance claim, as judges will heavily discount cost claims that seem excessive compared to the damages at stake.
- Keep detailed, organized records of all legal invoices and disbursements paid throughout your lawsuit, as you will need an itemized bill of costs to successfully claim these amounts from the court.
- Have a transparent conversation with an employment lawyer about your personal risk tolerance and the realities of 'adverse costs' before launching a claim, so you aren't blindsided by the financial realities of losing.
Featured Cases
Teixeira v. Hamburg Olson LPC
2017 ONSC 7532 (CanLII) · 2017-12-18Wrongful Dismissal: Conflict of Interest and Settlement Privilege
A wrongful dismissal case where the court ruled on motions to remove counsel, strike a motion record, and award costs. The case centered on a conflict of interest due to the lawyer's personal involvement, settlement privilege waiver, and the lawyer's representation of a corporation as a lay representative.
Phanlouvong v. Northfield Metal Products (1994) Ltd. et al
2015 ONSC 33 (CanLII) · 2015-01-05Wrongful Dismissal: Pre-Judgment Interest and Costs Award
A wrongful dismissal case where the plaintiff was awarded damages and pre-judgment interest, with a procedural dispute over the interest rate and costs awarded.
Naccarato v. Costco
2010 ONSC 2651 (CanLII) · 2010-06-15Wrongful Dismissal: 17-Year Employee Entitled to 10 Months' Notice
A wrongful dismissal case where a plaintiff with 17 years of service as a return-to-vendor clerk was terminated due to prolonged illness. The court determined a 10-month notice period using Bardal factors and awarded $12,600 in costs to the successful plaintiff.
Walsh v. 1124660 Ontario Limited
2007 CanLII 27588 (ON SC) · 2007-07-13Wrongful Dismissal Case: Costs Denied Due to Plaintiff's Impecuniosity
A wrongful dismissal case where the plaintiff, a single mother with no assets or significant income, was unsuccessful in her claims. The court addressed whether the plaintiff’s impecuniosity should affect the award of costs, ultimately denying costs to the defendants due to the plaintiff’s inability to pay and the public interest in access to justice.
Lavinskas v. Jacques Whitford & Associates Ltd.
2006 CanLII 22657 (ON SC) · 2006-06-30Wrongful Dismissal: Costs Award Determined Under Simplified Procedure
A wrongful dismissal case under the Simplified Procedure where the plaintiff was awarded damages. The court considered the appropriate costs award, focusing on fairness, proportionality, and the impact of litigation conduct on the costs determination.
Sommerard v. I.B.M. Canada Ltd.
2005 CanLII 39896 (ON SC) · 2005-10-12Wrongful Dismissal Case: Damages and Costs Awarded
A wrongful dismissal case where the plaintiff was awarded damages and aggravated damages, with the jury finding no just cause for dismissal. The case also involved legal disputes over the appropriate costs award, including whether punitive damages justify higher costs and the validity of settlement offers under Rule 49.
Bravo v. Etobicoke Ironworks Ltd.
2005 CanLII 36256 (ON SC) · 2005-10-11Wrongful Dismissal: Reasonableness of Procedure and Costs Award
A wrongful dismissal case where the plaintiff alleged dismissal without cause and sought damages for notice, overtime, vacation pay, and profit sharing. The court found it reasonable to proceed under the ordinary procedure due to the uncertainty of damages and the range of reasonable notice.
Slater v. Reebok Canada Inc.
1994 CanLII 7387 (ON SC) · 1994-12-12Wrongful Dismissal: Middle Management Employee Awarded 10 Months Notice
A wrongful dismissal case where an employee in a middle management position was terminated without just cause due to corporate restructuring. The court determined 10 months as reasonable notice based on independent databases and case law. The plaintiff was awarded solicitor and client costs of $3,800 after succeeding to a greater extent than under the offer to settle.